Jakarta is still considered a potential market for local and international mall tenants, despite the rupiah's significant decline last year and weakening consumer purchasing power, a Jakarta-based property consultant said.

Colliers International Indonesia released the Jakarta Property Market Report on Wednesday, saying mall tenants ranging from fashion retailers, entertainment provider to home furnishing, have been and will continue to expand their businesses.

“Overall, the retail market is expecting challenges. Indonesia is still considered a potential market for new brands, especially foreign retailers,” Colliers said in the report, adding that international luxury fashion brands such as Berlutti, Antony Morato, Chopard and Superga are “ready to enliven Jakarta's market.”

Not only the luxury foreign retailers, but both local and foreign brands are continuing to expand their businesses, particularly in 2014-2015, Colliers said.

“At least five retailers – H&M and Uniqlo, Cinemaxx, Blitz and Jysk – actively opened new outlets in the last two years,” said the property consultant.

Colliers also took a note for expansion of LuLu Hypermarket, the retail division of multinational LuLu Group International that is based in United Arab Emirates, which has opened an operating store in Cakung area of East Jakarta.

Meanwhile, fashion retailers like Banana Republic and Zara Home also occupied space at Pondok Indah Mall and Plaza Indonesia. They are said to be continuing to “refresh their tenancy mix with some new brands.”

Challenging times

All of those in expansion mode were doing so during a time when Indonesia was experiencing slower economic growth, especially in the last two years. This has in turn led to weaker consumer purchasing power in the medium-to-upper class customers.

Colliers said both tenants and landlords have been facing unfortunate situations, especially with the weakening of the rupiah against the US dollar last year, which had the impact of increasing currency costs, particularly on branded and imported goods.

“As a result, retailers have been increasing the prices of those goods,” Colliers said.

The rupiah weakened 10.89 percent last year to close at 13,795, according to data the Jakarta Interbank Spot Dollar Rate, or Jisdor collected Bank Indonesia.

Last year, investors had been anxious over the prospects of economic growth in giant economies such as China and the US, while at the same time they were also anticipating capital outflow in emerging markets like Indonesia, prior to raise in interest rates by the US Federal Reserve.

Colliers noted that the average number of visitors to malls in Jakarta and its greater area generally reduced in 2015.

Interestingly, the report also noted that the expansion of online shopping businesses – which typically do not need retail space to operate– is unlikely to change the occupancy rates of shopping malls.

“The physical experience of shopping is still in need because shoppers still need to see the real product, direct interaction with the crowd and other real experiences like eating, hang-out with family and friends etc. In short, the mall is not only a place to shop but more than that,” the report said.

In overall, Colliers said Jakarta was expected to see 12 new shopping centers between 2015 and 2018, whose permits were given before the capital imposed a moratorium in 2011.

New shopping centers in the pipeline for construction completion in 2016 include Pantai Indah Kapuk Mall in North Jakarta by Agung Sedayu Group; Shopping Mall@Pancoran in South Jakarta and Neo SOHO Mall (Podomoro City) in West Jakarta, both by Agung Podomoro Group; and Mall at Bassura City in East Jakarta by Synthesis Karya Pratama.

The year 2017 will see the opening of New Harco Plaza in Glodok, West Jakara by Agung Podomoro and Holland Village Mall in Central Jakarta by Lippo Karawaci.